London-listed mining giant Rio Tinto is to cut 14,000 jobs worldwide and slash capital expenditure by $5 billion (£3.4 billion) as it grapples with falling metals demand and plunging prices.

The company today said it would cut operating costs by at least $2.5 billion a year by 2010 as it fell victim to the global recession. It will hold the dividend at 2007 levels of $1.36.

Rio shares today rose 209p, or 17%, to 1467p.

It was unclear where the axe will fall but news of the job cuts was unwelcome for almost 2000 staff in the UK, including 500 at its head office in Paddington and 50 in the City.

Rio also has smelting operations on Anglesey in North Wales and at former Alcan sites at Lynemouth in Northumberland and Lochaber in the Scottish Highlands.

BHP Billiton last month abandoned a hostile $66 billion takeover bid for Rio because of the target's $42.1 billion of debt, turmoil in global markets and slumping demand for commodities.

Rio last month cut iron-ore output for the year by 10% because of reduced demand from steelmakers in China.The company, which a few months ago was struggling to find labour to meet demand for resources from China, said it has been forced to act by "the unprecedented rapidity and severity" of the global economic downturn.

The job losses will come from 8500 contractor positions and 5500 of its 97,000 full-time staff. Rio will also consolidate offices around the world, including its two in London, and plans to speed up outsourcing and offshoring of IT and procurement. It said: "The initiatives are aimed at preserving value for shareholders by conserving cashflow and reducing levels of debt."

Rio, which warned in October that its outlook has deteriorated, today added: "Since that time, demand conditions have worsened further."

Net debt has been cut by $3.2 billion since June, and Rio said it will pay down another $10 billion by the end of next year. Chief executive Tom Albanese said: "Our imperative is to maximise cash generation and pay down debt. We have undertaken a thorough review and are executing a range of actions."